Investment Approach

The long-term objective of the PGGM Private Equity (“PGGM PE”) team is to generate attractive risk-adjusted net returns for its clients equal to or above the relevant benchmark, corresponding to returns of 2.5% or more above public markets.

The team aims to realize this by constructing a globally diversified portfolio of primary private equity funds, secondary purchases of (portfolios of) private equity funds, and co-investments in companies alongside private equity funds. ESG is an integral part of PGGM PE’s investment and portfolio management process, which is further described in the ESG approach section.

Investment Strategy

The team focuses its investment strategy on three pillars and aims to partner with top-tier private equity fund managers across these:

Primary Fund Investments
Commitments to funds being raised by private equity managers (“general partner” or “GP”). The PGGM PE department combines top-down macro and segment analysis with bottom-up manager selection through extensive due diligence to identify funds that are expected to provide attractive risk-adjusted returns as well as fit its portfolio construction criteria.

Co-investments
Minority equity stakes in companies alongside private equity managers. Regularly PGGM PE is invited by GPs in the initial stages of a potential acquisition to co-underwrite an investment in a company. Alternatively, PGGM PE could be part of the syndication process after the investment has already been signed and underwritten by the GP. The PGGM PE department does not seek to lead transactions but rather to support GPs in their role as lead investor.

Secondary Fund Investments
Acquiring interests in existing private equity funds or companies from other limited partners. This allows for more rapid deployment of capital with shorter lock up of capital and/or quicker rebalancing of the portfolio.

Investment Criteria

Our team aims to build long-term relationships with some of the best GPs globally. The following criteria, among others, are considered when selecting new fund managers:

Team: a high-performing team with sufficient depth and diversity

Track Record: a proven track record of successful investments consistent with the go-forward strategy

Investment strategy / approach: a differentiated investment strategy and approach that enables the team to have a strong competitive position in its target markets, with a fund size which is commensurate with team capacity and market potential

Terms: fund terms that demonstrate a strong alignment of interest with investors and comply with PGGM’s fee protocol

ESG: an active approach to integrate environmental, social and governance (ESG) considerations in the investment process

Diversification: the fund should provide meaningful diversification in terms of risk and return characteristics compared to the existing portfolio

Investment focus

Funds: We invest globally in growth capital and buyout fund managers, with a typical investment ticket of €50m – €350m and a maximum size of €500m. Funds should have a minimum size of €200m, although this also depends on the fund type and geography.
Co-investments: We co-invest globally alongside GPs, with investment tickets of €20m – €250m and a typical investment size of €40m – €100m.

AlpInvest invests on our behalf in the US lower mid-market, which we have defined as all funds that target a fund size up to $2bn.

Investment process

We aim to be a reliable investing partner, with a clear 3-step decision process, including a factsheet, a preliminary investment proposal and a final investment proposal. After the preliminary Investment Committee discussion, a broader PGGM deal team will be formed including other PGGM departments. These departments include (i) Tax, legal and compliance, (ii) Operational Due Diligence, (iii) Risk Analysis and Control (iv) Customer Due Diligence and (v) Administration. Their roles are described in more detail in the Team section.

ESG approach

PGGM’s PE team is committed to investing responsibly. We manage our client’s private equity investments in order to contribute towards a stable pension for their participants while also taking into consideration the impact we are having on the world around us. We recognize that environmental, social and governance (ESG) factors can have a material impact on the financial performance of the private equity portfolio. Therefore, PGGM has developed 3D investing, which means that every investment is assessed on the axes of risk, return and sustainability.

Our activities are guided by PGGM’s guidelines for responsible investment in private equity.